Posted on 09/09/2020 1:59:06 PM PDT by nickcarraway
The Congressional Budget Office says the deficit will hit $3.3 trillion this year. The national debt will exceed the size of America's gross domestic product for the first time since the end of World War II.
When the federal government's fiscal year ends on the last day of September, America's national debt will nearly match the size of the nation's economy for the first time since the end of World War II, according to projections from the Congressional Budget Office (CBO).
The national debt will equal 98 percent of America's gross domestic product, a rough measurement of the size of the country's economic output, by the end of the current fiscal year, the CBO says in an updated budgetary outlook released Wednesday. The debt will continue to grow and will exceed the size of the economy by this time next year before eventually reaching 108 percent of the size of the economy in 2030.
The national debt has been rising for two decades, but it surged this year as emergency coronavirus response spending caused the federal budget deficit—the gap between what the government spends and how much it collects in tax revenue in a single year—to explode. The CBO now expects the deficit for this year to hit $3.3 trillion. That's more than three times larger than the deficit for the fiscal year that ended in September 2019. The budget deficit for the month of June alone exceeded every annual budget deficit during the George W. Bush administration.
But while the coronavirus might have made the federal budget situation worse, it really only accelerated trends that were already well established. As Reason's Matt Welch noted last week, spending under President Donald Trump surged by $937 billion in less than four years—and that was before Congress authorized trillions in emergency coronavirus spending. The Trump administration's tax cuts, while well-intentioned, also added to the budget deficit because they were not offset by spending cuts. It's true that Trump inherited a budgetary mess, but he (and the Republicans who controlled Congress during most of his tenure) have undoubtedly made the mess worse.
And, again, that was all before the current crisis hit. Here's a graphic from the Committee for a Responsible Federal Budget (CRFB), a nonprofit that advocates for lowering the deficit, that succinctly demonstrates how the coronavirus pandemic has accelerated America's climb towards a 100 percent debt-to-GDP ratio:
Source: Committee for a Responsible Federal Budget http://www.crfb.org/blogs/cbo-projects-debt-will-reach-new-record Maya MacGuineas, president of the CRFB, calls the CBO's latest projections "truly eye-popping."
"The last time we borrowed this much, just after World War II, the country ran over a decade of roughly balanced budgets to get us back on the right path," MacGuineas said in a statement. "Today, we face rising health and retirement costs and have no plan to even avoid the looming insolvency of Social Security and Medicare."
Indeed, the main driver of America's debt problem is the federal entitlement programs—Social Security, Medicare, and Medicaid—which account for about half of all federal spending. In a separate report also released Wednesday, the CBO projected that the federal trust for those entitlement programs will fall by $43 billion in the current fiscal year. The economic downturn caused by the coronavirus pandemic has caused payroll taxes, which fund entitlement programs, to decline. Unless Congress takes action, those trust funds will be exhausted within 10 years, the CBO warns.
Meanwhile, Congress continues to debate the short-term question of whether to spend even more money in response to the coronavirus crisis. The House has passed a $3.5 trillion stimulus bill, but Senate Republicans have blocked its passage due, in part, to concerns over whether America can afford to borrow more heavily.
In short, the debt crisis is no longer a hypothetical future event but one that is very much starting to impact the day-to-day and year-to-year budget process. A persistently high level of debt may not be a death sentence for the American economy (though it will almost certainly slow future economic growth), but it has almost certainly reduced America's options for addressing both short-term and long-term crises.
America missed its chance to get the debt and deficit under control. Now, it is thoroughly out of control.
Thank you Reagan, Bush, Clinton, Bush, Obama and trump.
This is a stocks vs. flows argument.
Debt and GNP aren’t exactly commensurate, but historically there’s been some sort of correlation.
Here’s a thought experiment: If I give you $1 million (make it trillions if you like), at zero percent interest, is it just a gift? I’d say the answer depends on whether or not its a perpetual (or rollable) loan, or there’s a hard payment date. If you can extend indefinitely, isn’t it a gift?
Unfortunately, our Treasury has borrowed at extremely low rates with a finite term. In 10, 20, or 30 years, those debts will have to be rolled over and reissued, likely at higher interest rates.
As a once-engineer, the key parameter I keep my eye on is whether or not real interest rates (nominal rates minus inflation) are positive or negative. If negative, credit is expanding. If positive (think Volcker), credit (and likely the economy) is contracting. They’ve been almost universally negative here and abroad for the last generation.
There, fixed it for you.
There is no Democratic mess that the Republicans can’t make worse.
There is no Republican mess that the Democrats can’t make worse.
“There, fixed it for you.”
No you didn’t, the deficit was rising even before the coronavirus hit.
Nothing that cancellation of our debt to China and confiscation of the ill-gotten gains of corrupt NGO’s and fake charities can’t solve.
> America missed its chance to get the debt and deficit under control. Now, it is thoroughly out of control. <
True that. So what are the options going forward?
Will the United States start making an effort to pay down the debt? No.
Will the United States raise taxes insanely to pay down the debt? No.
Will the United States repudiate the debt? No.
So what’s left? Crank up the printing presses! Devalue the debt. It’s the only viable option. The only question is when that will happen.
Side note: I always liked Johnny Cash. I wouldn’t mind seeing him on a future US $100,000 bill. And that might buy you tank of gas.
Cancellation of debt to China might be fun, and it might actually be just, but it likely have a bad effect on U.S. creditworthyness.
> No you didn’t, the deficit was rising even before the coronavirus hit. <
You’re right. I’m a huge fan of Donald Trump. I see him as the last hope for the Republic. But he has done nothing to address the deficit.
History will judge that as perhaps his biggest failure.
Because “We the People” don’t want to do anything about the deficit.
Everybody says, “Cut Spending”, until it comes time to cut their pet program.
What could go wrong?
> Everybody says, “Cut Spending”, until it comes time to cut their pet program. <
Agreed. But perhaps a small percentage cut across the board might have flown. I’m actually a bit surprised Trump has not used the bully pulpit to push for this.
Trump - of all people - should know that an organization simply cannot run annual deficits forever.
I wonder how many true conservatives understand this on here?
Hold on to your gold and silver and lead. The 2020's are going to be a wild ride.
There was no deficit before COVID-19.
Bush allowed something to creep up on his watch.
Trump was blind-sided by COVID-19.
As much as we carp about some of these things, I don’t think
we would have liked some of the alternatives under Bush
or Trump.
What bothers me more than anything is that we don’t make cuts
to get us on a pathway to doing better. Welfare is estimated
to cost us over a trillion dollars a year with all things
combind.
Sunset that thing. Give people five years to get off it.
Make their payments shrink 1/60th each month until it is
gone. Then never start it up again.
That alone would be one trillion less per year.
And by the way, be careful of blanketing everyone after
Carter with anything. It makes him sound as if he was the
last good president. LOL
I don’t know anything about carter. I was 8 years old. I guess I remember the gas lines vaguely. I always thought he was the worst president because of that.
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